• Maintain HOLD (TP: RM2.50). Axiata’s 1HFY24 revenue grew by 7.8% YoY to RM11.4bn, driven by improvement in all operating companies except for LinkNet and Dialog. At bottomline, the group reported a net profit of RM138mn (>100% YoY) compared to a loss of RM188mn in the previous year. This improvement was due to higher contributions from associates and lower forex losses, partially offset by higher net finance costs and taxation. After excluding exceptional items such as forex-related impacts, XL’s gain on disposal and M&A transaction costs, the group’s core net profit stood at RM330mn, which was in line with our and consensus expectations, accounting for 53% and 48%, respectively. We maintain a HOLD call with an unchanged TP of RM2.50, based on sum-of-part valuation with each of the operating company valued using EV/EBITDA metric.

• Key highlights. On a quarterly basis, the group's revenue grew by 2.9% YoY to RM5.8bn, driven by higher contributions from all operating companies, except for mobile operations in Sri Lanka and fixed broadband operations in Indonesia. Geographically, Indonesia's and Bangladesh's revenues remained stable, increasing by 0.9% YoY and 0.8% YoY, respectively. In contrast, Sri Lanka experienced a double-digit decline of 11.0% YoY, primarily due to lower hubbing revenue. Cambodia, however, saw a 16.2% QoQ increase to RM488.8mn, largely driven by higher data revenue from growth in the prepaid business. In line with revenue growth, the group’s earnings surged by more than 100% YoY to RM181mn, aided by lower foreign exchange losses, though partially offset by higher taxes.

• Earnings Revision. No changes to our forecast.

• Outlook. Despite Axiata's strong quarterly performance, we remain cautious due to external risks such as regulatory challenges, geopolitical issues, execution risks, and unfavourable forex translation. The unrest in Bangladesh is not expected to significantly impact Robi's revenue, as the country is focused on economic recovery following the former Prime Minister's exit, with the interim government prioritizing funding for essential services like electricity. Additionally, management has guided for FY24 KPIs, which include mid-single-digit revenue growth, mid-teens EBIT growth, and a capital expenditure of RM6.1bn.

Source: BIMB Securities Research - 30 Aug 2024